Chief Financial Officer’s Budget:
The Financial Director (Chief Financial Officer) has utilized the assumptions from Column D (in the Hypothesis Zone) to create the Income Statement and the Balance Sheet for year ONE, displayed in Columns BUDGET (J and N). This serves as our starting point.
Our Budget:
We will opt for different assumptions, placing them in Column E, and analyze the resulting disparities. That's what I'm going to guide you through—please follow these steps:
Confirm that, in the HYPOTHESIS ZONE, the values of the assumptions in Column D and Column E align. Column E must mirror Column D.
Introduce the following assumption in Column E: General Expenses (% increase): 3%.
With this change, you will observe alterations in the financial statements, and this is logical. By setting the goal (assumption) that general expenses only increase by 3%, we commit to having general expenses lower than those projected by the Financial Director, leading to a higher Profit. So:
Assess the impact of this assumption on the Financial Statements and affected Ratios (highlighted in the pink columns with an “x”) and provide a brief commentary comparing it with the Financial Director's budget. If you have information from the previous year and/or the industry, include comments on that.
What actions do you think should be taken to achieve this goal?
